Defence procurement: If process not expedited, we’ll have to rethink our investment in India, says IWI

Frustrated at the delay from the defence ministry in signing contracts where its products have cleared the trials, Israeli small arms manufacturer, Israel Weapon Industries (IWI) Ltd. says that it may have to rethink its investments in India. More than 70 per cent of the FDI in defence sector in India in the last two years has come from IWI for its joint venture project with Punj Llyod Ltd at Malanpur in Madhya Pradesh.

“We have been here in India for 12 years, and have sold small arms worth tens of millions of dollars to defence, law enforcement agencies, BSF and others. We were one of the four firms which bid for the close quarter battle carbine for the army in 2010, and were the only company selected after the trials from 2012 to 2014. But nothing has moved in the last two years,” Mark Shachar, VP business development of SK Group of Israel told us. IWI, a manufacturer of small arms, is one of the six defence companies that are part of the SK Group.

IWI, along with American Colt, Italian Beretta and Swiss Sig Sauer participated in the 2010 tender for 44,600 carbines for the army, which includes the import of 33.6 million rounds of ammunition. The weapon and ammunition deliveries are to be concluded within 18 months, alongside the transfer of technology to the Ordnance Factories Board to license building the designated carbine in India. Beretta fielded its ARX-160 model, the Colt the M4 while IWI fielded its Galil ACE carbine for the trial.

The trials, including the confirmatory trials, were completed in July 2014. Selection of IWI as a single vendor, although permissible under the Defence Procurement Procedure, led to complaints from other contenders, notably Beretta about the process. Last year, the defence ministry formed a committee of three Lt Generals to confirm if the process was followed in the carbine selection process. Sources said that this committee found no wrongdoing and the matter has since been discussed in the meetings of the Defence Acquisition Council (DAC) chaired by the defence minister.

Shachar now says that his company has not been conveyed anything by the defence ministry so far, and they will have to reconsider their investment plans under Make in India. “We were committed to Make in India, had a JV with Punj Lloyd. Our plan is to not just make small arms from that factory to India but to also export. We will have to think it over,” said Shachar.

“If this doesn’t work, who will come and invest here? This version of Make in India is clearly not for us. We can’t just invest with no outcome, we have been waiting for so long but nothing is moving. Frustration at the state of affairs is an understatement,” added Shachar.

Ashok Wadhawan, president of Manufacturing Business of Punj Lloyd, said that “the frustration of our partners who have invested in the project bothers us. Globally also, our partners are getting impatient with the situation here.”

IWI has committed to a 49:51 JV manufacturing plant with Punj Lloyd for small arms at Malanpur in Madhya Pradesh. Sources said that IWI is expected to send a bigger tranche of FDI in the next couple of months. India has got no FDI in defence since the Centre relaxed its rules in June to allow 100 per cent FDI in defence where it results in access to modern technology. Only Rs 1.12 crore has come as FDI in defence since May 2014.